Isabella Mariam

The High Court of Kerala Division Bench of Justice A. Muhamed Mustaque and Justice Harisankar V. Menon has held that, while examining jurisdiction under Section 263 of the Income Tax Act, a tribunal cannot travel beyond the grounds actually cited by the Commissioner. Hearing an appeal by a charitable trust assessee against a revisional order of the Income Tax Department, the Bench found that the Commissioner’s sole objection—based on the Foreign Contribution (Regulation) Act categorisation of the recipient institutions—was unsustainable, and that donations to other registered charitable trusts constituted application of income for charitable purposes under Section 11. Having so concluded, the Tribunal, the Court observed, should not have proceeded to make further remarks on the continuance of exemption, and the appeal was allowed in favour of the assessee.

The matter concerns an appeal filed by a charitable trust registered under Section 12A of the Income Tax Act, 1961. The trust received donations from domestic and foreign contributors during the financial year 2013–14, relevant to the assessment year 2014–15, and made donations to 72 institutions also stated to be registered under Section 12A. The Assessing Officer examined the books of accounts and records and accepted the return of income through an assessment order dated 30.12.2016.

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Subsequently, the Commissioner of Income Tax (Exemptions), Kochi initiated suo motu revision proceedings under Section 263, issuing an order on 29.03.2019 setting aside the assessment and remitting the matter for fresh adjudication. The Commissioner stated that exemption under Section 11(1)(a) could be allowed only if the donee-institutions had similar categorisation under the Foreign Contribution (Regulation) Act, 2010.

The assessee challenged this before the Income Tax Appellate Tribunal, which held that the donations made amounted to application of income but upheld the revision on the ground that the assessment order did not clarify whether the donations aligned with the trust’s objects. The assessee thereafter filed the present appeal raising questions of law as to the legality of the revisional jurisdiction and adequacy of enquiry by the Assessing Officer.

The Court recorded that the Commissioner had exercised revisional power for the reason that “the benefits under Section 11(1)(a) of the Act could be extended only when the institutions to which donations were made had a similar categorization as that of the appellant under the FCRA Act.” The Court noted the Tribunal’s finding that donations made out of current year income to another charitable trust constitute application of income. It stated that “the benefits under Section 11 of the Act are not in relation to the provisions of the FCRA Act.”

Referring to the Commissioner’s reasoning, the Bench stated that “the Commissioner was not justified in exercising the suo motu revisional power under Section 263 of the Act, as rightly found by the Tribunal.”

The Court then examined whether the Tribunal could sustain the revision on a ground not relied upon by the Commissioner. It observed that the Tribunal went beyond the scope of the appeal by recording that the assessee failed to establish that donations were made to trusts having the same objects. The Court stated that “this was not an issue highlighted by the Commissioner while exercising the revisional power under Section 263 of the Act.” It added that “the Tribunal was not expected to go out of the scope of consideration in the appeal and issue further findings so as to sustain the revision order.”

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The Bench relied on Commissioner of Income Tax v. Chandrika Educational Trust, recording the following extract: “when the Commissioner has chosen to set aside the order of the Income-tax Officer only on a particular ground, the Tribunal is not entitled to go beyond and sustain the order of the Commissioner on grounds different from that relied on by the Commissioner himself.” Agreeing with this principle, the Court observed that the dictum applied because “only one reason was highlighted by the Commissioner for exercising the power under Section 263 of the Act and the Tribunal having found the said reason as not a valid one, the Tribunal should have stopped there.”

The Court directed that “the appellant is entitled to succeed. This appeal would stand allowed, with the questions raised being answered in favour of the assessee and against the Revenue.”

Advocates Representing The Parties

For the Appellant: Shri. Abraham Joseph Markos, Sri. V. Abraham Markos, Sri. Isaac Thomas, Shri. Alexander Joseph Markos, Sri. P.G. Chandapillai Abraham, Shri. John Vithayathil, Sri. Paul P. Abraham, Shri. Joseph Markose, Senior Counsel

For the Respondent: Shri. Jose Joseph, Standing Counsel, Income Tax Department, Kerala; Sri. Cyriac Tom

Case Title: Save A Family Plan (India) v. Deputy Commissioner of Income Tax (Exemptions)
Neutral Citation: 2025: KER:83398
Case Number: ITA No. 81 of 2025
Bench: Justice A. Muhamed Mustaque; Justice Harisankar V. Menon